Understanding The Cryptocurrency Boom

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If we compare the word’s currencies – we know that eventually, all fiat returns to zero. Given game theory, when currencies begin to fail – where do people turn? Generally, they turn to the reserve currency. You will likely see USD in all counties as a backup and in many countries, they much prefer USD to their native currency. For all of its faults – what currency is stronger?
The US can export its inflation everywhere else because other countries require USD to conduct nation to nation transactions. This is nothing new. French President Charles de Gualle complained of this in 1965 before Nixon too the US off the Gold Standard five years later. This is captured in the Youtube video of his speech on the topic.

I suspect we would see about every other county’s currency crumble under the strain before the USD? Whose currency would the US turn? Whose currency is stronger? When they begin to fail – I suspect the USD would only become stronger as the rest of the world grows to rely on it even further. Many on this site would clamor to say to say Gold and Silver. But I would counter that the current generation – given the choice would not go back to the standard of centuries past. It is my belief that gold and silver have had their day. There is simply not enough to go around for 8 billion people. Going back to paper receipts for the material only opens again the corruption of third parties and central banks who most agree already manipulate prices and the world already over reports the amount of gold held for accounting where 100 to 1 people think they own it. Some argue that day of reckoning will only justify those who hold gold. But this is still not enough to sustain a world economy. Subdividing it into micro-grams won’t be enough. The power of blockchain is that it is considered immutable and those who hold the private keys are the recognized owners that can move ownership of the tokens containing records. Many here have expressed concerns over the various forms of “Fed” coins that are likely to emerge. They are likely correct in seeing the possible erosion of privacy that may be a design ‘feature’ the Feds would like to introduce- supposedly for the expressed reasoning of fighting terrorism. However – some seem to believe that would be the end for neutral, permissionless, open standard public blockchains and the host of use-cases that are being developed around them. Only the least educated in blockchain technology still believe the Genie can be put back in the bottle and the great experiment will simply be forgotten. I wonder if they imagine some ‘Kind of the World” will declare that everybody must stop their research and progress immediately as if some sought permission of anybody, to begin with. We are the rebel forces. Some people have a very narrow view that the USA or the friendly governments are ‘the powers that be’ would simply stop it..if they could. See the Ted Talk from the prosecutor in the Silk Road Case.
She admits in the talk that the US government found even back in 2013 there was no way to stop bitcoin. Let alone the 800 cryptos created in its wake. It all goes back to the fact that all the armies in the world cannot stop an idea whose time has come.

It would be trivial now, given the knowledge gained in the last eight years, that the world’s best computer scientist would spin off a near-clone of any crypto currency that might be infiltrated, outlawed, breached or whatever dastardly dead you might think up. Creating hardware solutions to break encryption has already been done. So it is likely and probably following game theory that this could and would happen again if possible. But no spy agency works in a vacuum. The NSA has been infiltrated, I’m quite certain that there isn’t a spy agency in the world that is immune to this. People run these agencies. People are human and can be bribed, coerced, embarrassed, killed for their secrets. However, you can’t fool math. Having a number of private keys in excess of all the atoms in the universe is a physical law. Elliptical curve encryption and one-way functions are physical limitations for today’s technology. There are quantum-proof encryption techniques.
Perhaps one day there is a computer so advanced we can’t imagine it yet. But you also cannot discount the human desire for privacy, for fairness, and our ingenuity to overcome whatever barriers are thrown up to limit one’s freedom. I do not discount the human spirit. That was this inventiveness and rebel spirit that created the invention of blockchain and cryptocurrencies, to begin with after the 2008 banking crisis.

42

Mrees-
You don’t need to fight “wild terrorist anonymous crypto” currency directly. You just pass a law that says exchanges that trade it can no longer link to the banking system. No more USD in or out. And if you are the head of the central-banking-warfare system, you make this rule apply to any banks that do business in your country - or do business on the SWIFT network. Its the same technique the US used to force the Swiss to cave on banking secrecy.
So Russia & China can play with anonymous bitcoin all they like but the rest of the world pretty much has to comply. No anonymous crypto - “for the children.”
And localbitcoins still work, but boy how tedious is that? And you can criminalize that too, just for good measure - at least as regards the anonymous terrorist-funding crypto transactions.
This approach will deal effectively with 95% of the (prospective, anonymous) crypto use in the west. And maybe the second prong of the attack is an NSA-driven subversion of the anonymous crypto code itself. Drive away the “mainstream” anonymous-crypto traffic through criminalization, and the traffic that remains are the criminals - who are then trackable because of the NSA’s secret hacks. Surprise!
Same concept was used by NSA to restrict deployment of encrypted email traffic. If they can keep the “normals” from using encrypted email, then they can focus their attentions entirely on the criminals that do - mainly by hacking the endpoints. That one worked great, btw.
Again, this (maybe) only happens if we start to see more widespread use of truly anonymous transactions, and our central planners start to get upset that they can no longer trace everything.
I’m fully in favor of truly anonymous transactions. It was my one reservation about using coins - the traceability. I just think it will bring about a reaction from the Empire.
As for fiat “going away”, well that’s never happened in the history of the world. Fiat remains with us regardless of its poor track record over the long haul. You may say “it is different this time” - I’m going to go with the historical experience and say its never different this time. Fiat in one form or another will remain. Look at Argentina selling 100 year debt after defaulting 6 times in the past century. 3 times oversubscribed. I don’t think fiat is going away. People like it too much.
Charles - I agree that failed states cannot effectively fight crypto - or really any other form of comparatively hard currency, because the incentive to find a relatively stable currency of any kind is so huge in the general population. Note that a relatively more stable fiat acts as a hard currency in these places.
The criminalization-of-alternative-currency approach only works when the mainstream alternative is good enough. Once the local currency is destroyed, nobody minds becoming a criminal if that is what it takes to survive. “If the law says that, then the law is an ass.”
An example: Cambodia today uses USD as their currency. Not as a reserve currency, as the actual circulating currency of the country. All the locals quote goods and services directly in dollars. Its very odd to see. You land in Phnom Penh, go to the ATM to get some local currency, and out pops a couple of crisp C-notes. USD went from de facto currency to de jure currency - I’m not even sure when. Do Cambodians say “boy, this filthy fiat money, its 98% confetti?” Not so much. My sense is, they think its awesome.

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Many people continue to make the mistake of thinking of these tokens performing only one of their thousands of identified use-cases. Money is just the tip of the iceberg. Do you suppose they can kill TCP/IP. Radio? Television signals. Money is communication. While the fiat system works well for the most part, there won’t be much reason to switch to an alternative. Except for cross-border internet transactions, I suspect nobody will care.
But blockchain technologies by nations will still be issued by fiat. Blockchains will only be a method of issuance and tracking as it is likely to save money over issuing printed paper and coins, and the associated counterfeiting that happens. That all goes away. But it is possible and probably in some cases where some governments abuse that power. Some of the fears brought up by others might happen. But that doesn’t mean the technology will go away.
Although Ethereum is often thought of as a currency, Its main purpose is to act as a transport layer for holding contract data – storage and computation. It is also the value payment mechanism for the network nodes. It is likely the transport layer creating web3. Although using it can be made private – the governments are as likely as anybody to utilize this. Just like they use the internet but realize enemies of the state also use it. It’s silly to me to think they would shut it down when they’ve perhaps shown the most interest in it. They will likely be among the first to use privacy features.
If they don’t eventually like Ethereum. There are endless alternatives that will be happy to take up the slack. The so called “Powers that Be” will look like key-stone cops playing whack a mole when they then have to fight Monero, zcash, Dash, and a hundred more – plus the thousands of more that would be created right after that. It’s a fight they can’t win. The rules have already changed. That’s a big reason you saw Russia switch so suddenly from creating laws that would put people in jail for attempting to conduct business in bitcoin – to completely legalizing as a form of currency in a matter of months.

These developments aren’t sneaking up on agencies of the world, not just the US. Game theory suggests that the US would LOVE the citizens of Russia to be able to use Z Snarks to protect them against a brutal Russian Government as a form of Self Defense. Likewise the Russians might think the same for US population against the US government. Expand this out to each country encouraging the ‘freedoms’ of their enemy countries and you soon come to realize that what’s good for the goose is good for the gander. This will even the playing field as the internet knows no borders and when you learn more about web3 and mesh networking, you’ll likely see your argument and expectations are rooted in current internet technology not that of the next generation. It seems some people assume the governments all work in coordination with each other to form the solid “TPTB” group. But this is silly. The playbook is available for everybody – if one nation decides not to pursue it – they will be left behind. Only the least prosperous nations continue to stifle innovation.
See the world economic forums recommendations of using blockchain to help solve a host of problems of the world. See their report issued yesterday. http://www3.weforum.org/docs/WEF_Realizing_Potential_Blockchain.pdf

Mysterium. Token based virtual private networks. Think of a world-wide tor network. On and off the fly as a continuous fight against tyranny. Each nation would LOVE the other nations to have the freedom of that is afforded some place like China or Iran to bypass the national censorship. Yet might not like that same sunlight shown on themselves. Yet sunshine is a powerful disinfectant.
AugerGnosis – Prediction markets. Not currency – although they are traded on open markets – and markets that will soon be are decentralized. It will be entertaining to hear one try to describe how any government is going to stop a decentralized autonomous organization living in the cloud and processed by tens of thousands of nodes around the world.
Factom Sia Interplanetary File System Filecoin. Operate as storage tokens for Distributed File Tables. Grid cloud open sourced file storage held by encryption. Not currency. But traded as currency for their expected future value.
Platform coins: Ethereum, Status, Maidsafe, Waves, Bitshares, Nxt…and more – entire ecosystems that can contain their own protocol systems and units of value including currencies asset recording land and title, property etc. Not currencies – yet traded as tokenized rights and digital assets.
I think you might be giving way too much respect to law and politicians to keep up with technology it is clear they don’t understand. I can site you several examples of senators and other lawmakers whom at one point held press conferences and forums special committees to outlaw bitcoin years before understanding it well enough. I can show you none that continue to do so. Once they take time to education themselves. It would be fun to hear anybody make an argument showing the opposite is also true. Which one has taken the time to speak to experts and learn…and also continues to want to ban them?
In my years of experience, the only people disregarding disparaging talking about banning them – have almost no real understanding of them. I’m sure we can find an idiot here and there who will continue to be idiots even when confronted with an opportunity to learn and make intelligent observations. You can cure uneducated – but you can’t cure stupid.
This just touches the surface of the thousand-arm octopus that continues to grow more arms. It has grown enough in so many directions that there is no one country that can control them all world-wide. As people and other governments have use – they will go on. A government can only have a hope of slowing it down in their own country – while the rest of the world flourishes in the new paradigm.
Yet, we will likely see some continue to try (see Ecuador)

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https://mises.org/library/how-much-longer-will-dollar-be-reserve-currency

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mrees-
Sometimes it feels as though you spend a fairly large amount of time arguing against things I didn’t say, and about which I already agree with you 100%. It is informative, but its also a bit confusing. “Did he read what I had to say?” I ask myself. But anyhow.
First, a technical objection. The coins are not protocols. I’ve lived protocols my whole life, and they aren’t that. The closest CS description I could apply is a replicated database - which implies an embedded protocol whereby all the databases negotiate an agreement on what comprises the records in storage. Replicated database problems are hard. I’m not a database guy, but I’ve noodled around on the problem. That’s why “sharding” is both key to scaling, and a really hard thing to get right, especially in the presence of adversaries. At the core though, its a shared, replicated, fault tolerant database, not a protocol. All the language describing the hard stuff - that’s all database language.
The good news is, if you get it right, you’ve solved some really hard problems, which is intrinsically very useful for the world. And that’s the promise. Databases remain “the hard problem” for most shops. Scaling the database is usually the big, expensive bit. Its cheap to increase capacity for serving read only content. Its quite expensive to increase the TPS of your database, assuming you actually need to write as well as read. Hard problems in *coin are thus database, not protocol.
As for how the coin world appears to the Empire - coins walk like currency, quack like currency = its a currency. But it is only a currency with instantaneous value because of the banking system link. No link = no value. That’s extreme, but I’d say, 90% true. Eliminate the banking system link, and the coin market cap probably drops by 90%.
The Empire hates cash - that has been demonstrated in a thousand different ways. Modi in India eliminating banknotes, Draghi at the ECB whacking the 500E note, and Summers here in the US calling everyone with cash a criminal. Civil asset forfeiture. “Structuring.” Anti-money-laundering rules. The system - the Empire - hates cash. Anything that looks or smells like cash gets hated too. Cash is a safety valve, a way for common people to bail out of an untrustworthy system, and to buy things the Empire prefers they don’t buy. In the eyes of the Empire, that’s all a bad thing.
Will the Empire act to further hose cash (and/or currency conversion) instruments when times get tough, and they want to impose capital controls, prevent bank runs, increase financial repression, apply negative interest rates, remove safe havens, etc? That’s the question. If they want to do this, coins will have to be in the crosshairs, and the coin exchange banking link is (I believe) how they’ll try to enforce their will.
Will the underlying technology disappear? Of course not. Its way too useful. But when the cash-hating starts to get real, I don’t see the coin world acting as a safe haven, just like “shorting” isn’t a guaranteed protection because when times get tough, the Empire will change the rules just like they always do. Things you thought were permitted and “just fine” will suddenly be taken away.
You are welcome to talk about the long term promise of the coin world, how a great idea can’t be stopped, how you can’t eliminate TCP, how its an octopus, and all the rest of it. I agree with the tech bits. But when it comes to market cap, I say: if the Empire responds during a crisis by “suspending” the banking links to the exchanges, that coin market cap will plunge faster than you can blink. The tech aspects of coins will remain, but the market cap will vanish. Temporarily, of course. Hang on tight, I think you say. As long as you don’t really need access to all that value to pay your rent, it should all turn out fine.
I stand by what I say about trusting anonymity, however. NSA works by compromising endpoints, mostly. A system is only as secure as its weakest link. Given the hardware & OS are provably insecure, I’d guess that’s the vector through which the attack will come. IOW, I wouldn’t trust my life to blockchain anonymity, any more than I assume that my own personal computing machine is safe. That doesn’t mean blockchain is useless, far from it. I think its great stuff. In normal day-to-day commerce, it will be awesome. Just don’t operate under the delusion this very public resource is “100% anonymous.” Such a delusion just might get you killed, in the wrong circumstance.

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Dave, not to quibble, but Rome never issued paper currency and they had a very robust Imperial order. In Venezuela, fiat issued by the national govt. is very definitely going away.
I have explained the source of USD strength and predicted its further strengthening here for years. That said, the end game has always been simple: 1) debauch the currency to inflate away unpayable debt or 2) write off the unpayable debt. The end game is forced by interest payments rising to the point they squeeze out all other spending.
The first impoverishes all owners of the fiat currency equally, the second impoverishes the owners of all the debt, i.e. the wealthiest class. This explains why the political class favors inflation/devaluation as the “solution,” and half-measures that maintain the status quo such as debt jubilees, and Universal Basic Income (UBI), which is designed to funnel enough cash to debt-serfs so they can continue to service their debts, under the guise of “helping” them.
Nobody has to be “believe” in cryptocurrencies, any more than they have to “believe” in a stock, asset, kind of capital, etc. You own what you want to own. The future rewards those who bought the right stuff and destroys those who bought the wrong stuff. There is a Darwinian aspect to a quasi-free market. If you think BTC is bad (only used for vice, etc.), doomed, bound to be outlawed, whatever, don’t own any. It’s that simple.
As I have tried to explain here, cryptos (at this point, especially BTC) serve the interests of the wealthy in the end game. For this reason alone, they will remain legal in enough jurisdictions to be useful. Download your BTC on a thumb drive, tell the authorities you lost the drive, oops, my bad, open the drive in a jurisdiction in which BTC is legal and away you go.
The buffers in the current system of fiat, fractional reserve and credit/debt are thinning rapidly. Phase change ahead. Buy what you think will survive the phase change.

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Charles-
I totally agree. Fiat has gone away a very large number of times.
Is it gone now? Clearly not.
Fiat money is a cat with a million lives. Perhaps this life will be the last. I’m going with the odds and say no. Fiat promises a free lunch. People love the promise of a free lunch. We just can’t say no.
Major price risk to crypto right now that I see is when the Empire pulls the plug on the banking link to control the flow of money in a financial crisis. You definitely still get to keep your crypto - that’s not the issue - and it will keep functioning. Again, not the issue. Its the exchange rate that I’m concerned about. I believe it will undergo a massive move. And it won’t be in the up direction.
Crypto survives anything. So does gold. Throughout the process, the key question is - what’s the price?

48

Dave said

First, a technical objection. The coins are not protocols. I've lived protocols my whole life, and they aren't that. The closest CS description I could apply is a replicated database - which implies an embedded protocol whereby all the databases negotiate an agreement on what comprises the records in storage.
He is relying on the logical fallacy called. "Argument from Authority" - Which states just because somebody is an expert in one field doesn't make them an expert in all fields. I won't have my doctor fixing my car for example. https://en.wikipedia.org/wiki/Argument_from_authority Everyone can prove this to themselves by looking at coinmarketcap.com - search on probably any of the tokens listed and Google it - with the world "Protocol" after its name. Guess what... They ALL are protocols. Often - it's the very first description. That David made this claim is likely something he'll wish he could take back. Some of these platform tokens are a HOST of several layered protocols that would not work without the token itself as the keystone of it all. Because these are indeed communications data layers transport layers, applications themselves - and useful required for the explosion of innovation - it is laughable behond words that a. A government would ban them. B. A government could ban them. This is roughly the equivalent of saying they will ban BitTorrent. We see how successful that has been. Some would like to ban TOR - Nope. Some would ban VPN - Good luck. In fact, the opposite is true. In a complete 180 of David's theory - the banking system is embracing them. https://www.ft.com/content/f15d3ab6-750d-11e6-bf48-b372cdb1043a?mhq5j=e1

Even the Whitehouse is loading up with blockchain and bitcoin fans.
https://bitconnect.co/bitcoin-news/437/trump-administration-adds-more-pr…
Because the appsplatformsnertworkstokens all have many uses and represents the future of networking the internet - and mostly all innovation, it is often called the most important invention of our lifetimes. I don’t see many governments hurrying to shut the door. Of course, Dave didn’t even know about ethereum until about two months ago. He’s still got a LONG way to go before he gets his head wrapped around it - Let alone the other 800 tokens not called bitcoin.
Let alone the others still convinced this is a tulip bulb mania. Speaking of which - I found this hysterical. I wonder if their calendars are still from 2013.

49

Mrees-
I notice that in your response you chose not to address my central point, that of cutting off the exchanges’ access to the banking system by the central authorities, nor about the NSA-related security issues, but instead you chose to focus on other stuff.
We all know that technical people love focusing on stuff in the weeds - while others (probably correctly) shake their heads and view it as “angels on the heads of pins” discussions. But since I happen to like the weeds, here goes.
I gave some evidence for why I felt bitcoin was a shared, replicated, distributed database problem. I thought you’d be able to extrapolate the whole picture from the parts I mentioned. I was wrong. So let me spell it out further. :slight_smile:
The central piece of any coin is “the blockchain”, yes? Everyone is excited about blockchains. Lets see. Blockchains are stored on disk. You have many, many writers to the blockchain. One “hard part” of the problem is mediating which writes win. All three things are characteristics of databases. You have to store the blockchain somewhere. Database. Readers want to execute queries against the blockchain. Database. Everyone wants an authoritative, current copy of the blockchain. The blockchain is essentially a transaction log - which in some cases, actually gets reverted (DAO). That’s database in spades. Internally, I’d be willing to bet that the code has a database that gets updated with each new block - which we could just as easily call a transaction. In fact, now that I’m remembering, when I downloaded a full client, it actually said - building database. The guys writing the code viewed it as a database. Perhaps that’s why I think of it as a database. Because they did.
In fact, all a blockchain is, is a database transaction log. Each block is an atomic transaction, which can be reverted if necessary. To see the current state of the bitcoin world (who owns what coins), you play the log forward, executing the instructions in each transaction in series, and you construct a database as a side effect, with coin balances moving from one record (wallet) to another. I’ve simplified, but that’s the core.
Of course there are protocols embedded - as there are with any shared, replicated database design. But when you have something stored on disk, to which there are many writers, and the writes must be mediated somehow, and then authoritatively marked as committed, with the changes being sent to all readers who want to keep their local copies up-to-date - that’s a database.
Mediated. Writes. Committed. Shared. Stored. Updated. Query. Transaction. All database words.
And now sharding. Where does that word “sharding” comes from - the major hard piece that ethereum is trying to do? The protocol world? No. It comes from the database world.
https://dev.mysql.com/doc/mysql-utilities/1.5/en/fabric-quick-start-sharding-scenario.html
https://en.wikipedia.org/wiki/Shard_(database_architecture)
Databases have done sharding for years. Why? its a scaling technique. For databases. If ethereum isn’t at its core solving a database problem, why on earth would they need to employ sharding as a technique?
So in review, it walks like a database, quacks like a database - it even gets database diseases, and everyone talks about the thing using database terminology. I wonder why that is?
Again, love the technology, it will never die, it is solving some really tough problems, and when it does, it will do some really interesting work. V1.0 is already doing interesting stuff, and surfacing interesting problems. But I don’t need to have studied it for decades to spot a database when I see one. Its especially helpful when the writers of the code actually call it a database in their debugging output.
Ok. My final bit of evidence. Wiki. Paragraph 1, sentence 1:
https://en.wikipedia.org/wiki/Blockchain
A blockchain[1][2][3] – originally block chain[4][5] – is a distributed database that is used to maintain a continuously growing list of records, called blocks.
At some level it really does matter what we call it. If you put a proper frame around it, it will help you to understand both the problems that other things like it have had, as well as what it is trying to accomplish.
I can definitely see that individual coins have their own record formats as well as mechanisms of interaction - we can call those protocols, why not - but they all happen on top of and are enabled by the distributed (blockchain) database.

50

https://mises.org/library/how-much-longer-will-dollar-be-reserve-currency

51

Let me do a little teaching here. Since I’ve taught courses on this dozen of times to hundreds if not thousands of students by now, I even have portions of some of my classes linked in other sections of the blockchain discussion group.
As I’ve got years of studying including over 10,000 hours and many published papers, you can infer that I am an expert in this field. From my conversations with David, he assumed all were basically bitcoin. That should shed a little light about qualifications to speak of this topic. FYI, I’m currently creating coursework for online education that will be available shortly,
Calling a blockchain a database is akin to calling a computer just a hard drive. Yes, there is an element of ledger and database in a blockchain, but everything David described could more accurately be called a distributed ledger technology. This is what IBM’s Fabric and Corda like to use the word “Blockchain” as a buzzword, but that is false advertising because they do not have the most important aspect of a blockchain – they are missing the token of value. As such, they miss all the incentive and inventiveness that go along with aligning parties in game-theory and capitalism of competing. DLT is what communism would love as it keeps those in power – without disrupting the status quo. DLT’s aren’t all that inventive – and IBMs people have called them just distributed databases which we’ve had for years.
Some go further and say that DLTs where “blockchain inspired’ – but they only use half of what a blockchain uses and these are the points that David fails to either recognize or address. People don’t see true reality – they see their interpretation of reality and how they see themselves projected into their version of reality. We all do this and take our background, experience, education, political and religious backgrounds with us and they all influence how we categorize things. David likely has a strong Database background so in his natural viewing lens is to naturally see anything having database-like qualities will fall into the categories he is most comfortable with his previous experience. This is just how I interpret his thinking, but it makes sense and there is nothing wrong with that. It reminds me of the story of the six blind men touching the elephant and describing what they think an elephant is. David see’s the database-like ledger and jumps to the conclusion that this elephant is a database.
Differences:
Databases generally trust all participants the write to it. Blockchains do NOT trust anybody who writes to them. They are generally fierce competitors. People that write to these ledgers have economic incentives with the promise of the token as a reward. Because of this competition – they all verify the rules were followed and because of the combined action – the entire safety of the blockchain is enhanced, because all of the competition means that if somebody tried to infiltrate and change a record, they would have to have more computing power than all of the others combined. The net effect is the ‘invisible hand’. David makes no mention of any of these most important qualities.
Databases as generally centralized. One person can pull the plug or change the rules if they like. IBM, for example, has the final say on the “Fabric” DLT they’ve made open-source and are trying to get companies around the world to adopt. The method they interact with all of these rules is called a protocol. The protocol defines the speed, what information is contained, how many transactions get reconciled into blocks and how difficult the competition becomes for the right and reward to include these blocks creates the different value each token is found to be worth on the open markets which are decided by laws supply and demand.
The security encryption, mathematical algorithms vary between all of the hundreds of tokens available. Of course, many of these are scams and offer no real benefit. The PROTOCOL can keep the participants private, or they can be open. Entries on the ledger can as well indicate complete openness or privacy. As important than the database is his value is what drives interest by the public, press, and investors that utilize it. There is little news creating headlines for people clamoring for DLT and probably no possible riches for common poeple. Although the DLT users have their own use-cases for keeping untrusted parties on the same ledger – they use already established banking fiat money instead. This is because its dictated by decades-old laws and regulation that couldn’t image the computing power and real-time auditing that can take place with triple book accounting abilities that up-end the 500-year double accounting methods. Again, law and legislation will be slower to adapt, but you see it happening more quickly now in Delaware :http://www.coindesk.com/delaware-house-passes-historic-blockchain-regulation/
And Illinois . http://www.coindesk.com/illinois-blockchain-initiative-policy-regulation-bitcoin-blockchain/

With a DLT, there are endless tokens to carry the information. There is no concept of scarcity. Therefore smart contracts can be broken as they rely on payments from national fiats which can loose value. Protocol tokens issued in blockchains are limited in supply, these are the first digital items that cannot be copied endlessly like cat pictures on the internet. Because of their usefulness, protection - and non-counterfietablity they don’t rely on a national backing. Some people still think that not having a nation backing them is a bug - I think of it as a feature. They are backed by physics (in proof of work) - and math - and economic incentives, through game-theory and utility. I think of this utility and usefulness as intrinsic value. You can’t have value without all of these combined functions all working together from within the protocol rules themselves. The database-like functions are just one (vital) piece of the puzzle.
However, if the fiat system breaks down the DLTs might also be useless. Tracking all the bank’s race to the bottom might prove interesting to historians they won’t do much for the other populations that are scrambling to put savings into these cryptocurrencies that can run just fine without a fiat once the adoption is more common. This is already happening in countries with hyperinflation. And likely to David’s surprise, don’t move in and out of that nation’s fiat. They are bypassed.

https://www.forbes.com/sites/realspin/2017/02/03/why-venezuelas-currency-crisis-is-a-case-study-for-bitcoin/#51e8af2c19b2
David makes the silly argument that once a country bans it, it will be over. This has already proven to be false:
https://news.bitcoin.com/use-bitcoin-ecuador-grow-government-ban/

I suspect governments themselves will be scrambling for the lifeboats of neutral currencies that are tamper resistant.
Finally, David goes out of his way often to speak of the hardware abilities of the NSA to create chips that can infiltrate a blckchain and the encryption that relies on it. But I suspect he hasn’t researched the defensive measures that are built into protocols such as DASH which uses the X11 protocol which includes at least 11 different security encryption protocols which are wrapped inside each other as layers. A partial list of these various competing security algorithms used in the various protocols needed for mining and protecting the network can be found at one of the profitability websites currency miners use. One of these is “Coinwarz.com”
https://www.coinwarz.com/cryptocurrency

Even if a chip could be created to decrypt each of these algorithms into a hardware which would require massive expense and be hidden from view of the world – it is trivial to add another layer which would require rework and starting from scratch on a new chip that would have to be included in new hardware running from warehouses around the world in computing power to rival the rest of the network combined. Which would then just encourage a new software defense. In software, this is done with a few lines of code and take minutes and is asymmetrical. The key-stone cops doing the hardware whack a mole will soon run out of money and patience when they see the futile of this.
If they outlaw it, the other countries that are not in the domain of the USA influence will happily continue to use blockchain-based currencies. The nation that foolishly attempts legislation against them is limited to the borders of influence and we’ve already proven several examples of where this fails. There are many more examples - and this is just baby technology - imagine what it will be like in a decade. Technology is a natural force and like water – will just move to the path of least resistance. Nations that stifle it will just be left behind. The world is only discovering that they can’t beat math. Converging national problems with fiat will converge necessitating these currencies as a life-boat as Charles mentioned. Tokens are the result of the protocols first, the blockchain relies on one some of the features of a database but goes far beyond that aspect.
Tokens have private and public keys that allow for ownership. These are all encrypted and using processing power – this establishes trust – and the ‘trust machine’ There are dozens if not hundreds of moving parts. The ledger is important – perhaps even a center piece, but David likely will move past his present specialty knowledge and will come around to learning of the other important parts of blockchain technology. I’m proud of David - he has come a long way in a short time once the barrier of thinking everything worked like bitcoin. He’s extremely smart. I believe he’ll get there.
And we haven’t even gotten to the part where he plants the digital tulip bulbs that some crazy people still think must exist in their somewhere. :-). If would be ironically funny if somebody created a new secure encrypted protocol called “Tulip Bulb”.
David, if you get to the point where you find those invisible tulip bulbs - be sure to let me know.
:slight_smile:

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mrees I greatly admire your patience. After 6 years of explanations and arguments about cryptocurrencies I am completely drained of that commodity. I only recently started posting here , after almost 10 years of lurking here (not joined because of the fear and trepidation) because I saw some of your well researched posts on cryptos. Unfortunately there are greener fields elsewhere for positive discussions.
One would have thought this site would be an excellent place to take cryptos to the next level, but to be bogged down in endless circular arguments is draining and counter productive. Thank you for the light you shine

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For those who might be interested in an opportunity to obtain a new token I recommend TEZOS. You can get 6000 of them for 1 BTC. For today and at least part of tomorrow you get 5000 “tezzies” plus a 1000 bonus . The bonus is prorated and will drop off till the end in approx. 2 weeks. All the best

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Does anybody have any information about the velocity of bitcoin? How many of the coins are primarily held in accounts being used mainly for transactions, as opposed to accounts by people who just buy the coins from exchanges and hold them, eventually to be sold back in hopes of making a profit?
If the demand is mainly being driven by speculation, then there could be a tulip-style collapse of value at any time. Or, just as likely, this bubble will burst at the next financial crisis, along with all the other bubbles.
But if a significant and increasing volume of coins are being actively used for convenience purposes, or because of the security and low transaction costs, then maybe CHS is right that this boom could have legs.

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That is a great question. in the early days of BTC they were not worth much in relation to fiat currency. They were a geek novelty. The first known purchase was 2 pizzas for 10,000 btc. I have sold items for BTC and there are places where goods and services are provided for BTC.
I believe there are many people who were early adopters who have large amounts of coins and are holding them as the price rises, however I believe they are also using those coins for exchange of goods and services. I don’tthinkit can be quantified at this time since there is a certain level of anonymity. In the old days there was a site called Silk Road which operated on the “dark web” which catered to anyone and everything. It accounted for a large amount of commerce.
There are large and small online retailers that now accept BTC. I do not know where to find those stats but you could probably Google it. I think it is important to remember that BTC and all cryptocurrencies are in their infancy, and as such they will pass through many phases of development. There is certainly little doubt that there is a significant level of speculation right now but it is a store of value, it does have utility, and once the scaling issue is resolved it will be one of if not the best money transmitters available. To wit Western Union is exploring using it.
One of the largest spikes in its value occurred when the banks of Cyprus confiscated peoples savings. Also when the Greek crisis happened(still happening) there was another spike. The Chinese are using it to move money out of China due to currency controls. So I would say comparing it to tulips is somewhat inappropriate. the following link might prove useful.
https://www.forbes.com/sites/johnrampton/2014/07/02/how-bitcoin-is-chang…

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davefairtex wrote:
Lastly, a digital currency has the promise of utterly eliminating the banks skim from payment systems. Because VISA is a quasi-monopoly, merchants end up paying 2-3% fees just to get their money from the VISA payment system. With a bitcoin-funded electronic-cash card (at least in the future, anyway) that could be a nickel per transaction, flat rate.
A minor quibble, people complain about that 3% or so that merchants pay, but it's only because they don't really think about costs associated with all payment methods. Cash, Check, Card, and I suspect crypto-currencies all have similar costs. If your a merchant and you do a thorough analysis you'll find all payment methods are pretty comparable. You have the fraud costs, which will run you a percent or so depending on your business. You have the infrastructure costs to process a transaction, etc. Cash has costs as well, security, time to make deposits. How much is the cost of one armed robbery where a person gets killed because your a mostly cash based business? That 2-3% may start to look pretty reasonable. Another way to look at it, you pay 3% to get your money from someone who can not afford to buy what your selling, but can put it on credit, you as a merchant are not assuming any of that credit default risk which I'm guessing is going to be far higher than 3% when SHTF.
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The fraud costs are far from identical. Pin-based debit had by far the least fraud, but the card companies worked very hard to keep their revenue streams up - being a 2-company monopoly helped considerably. They wanted that percentage rather than a fixed fee. Gas stations were grandfathered in at … I think it was 20 cents, but everyone else had to give them that 1%. A check was cheapest for a merchant, if they could persuade the consumer to enroll in a check guarantee program. Checks cost about a dime. Yay checks! Grocery stores loved checks - from repeat customers who had gone through the credit check process.
Wal-mart and Costco found the interchange fees to be so onerous (and they were such large players) that they negotiated a special deal with the card processors - they made their own card, and handled the backend themselves. I think they got their costs down to 1%.
Merchants are also still liable for chargebacks. They don’t just get to keep the cash. The 2-3% interchange doesn’t make them immune to losses.
My strong sense, from my relatively short time in the business, is that there is plenty of “excess profit” in the transactions processing duopoly. I’ve noticed that the “free marketeers” (who assume prices always reflect market realities) sometimes don’t factor in the ability of a monopoly player to impose cartel pricing structures on everyone else. Monopoly keeps its power by granting goodies to the people that go along, either in government, or in industry.
At one point I recall asking a merchant if he found cash to be a costly way of being paid. He just laughed at me. “Hit me up with some more of that ‘costly cash’” he said.
Here’s a decent up-to-date report on how card fraud has changed over the years. CNP fraud (i.e. Internet fraud) is by far the largest segment.
One stat: in the UK, Credit card fraud losses were 13 bp, debit 4bp, and ATM (debit+pin) 2bp.
http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf

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davefairtext wrote:
The fraud costs are far from identical. Pin-based debit had by far the least fraud,
While most are pin based, there are also other debit card issues (source)
Fraud against bank deposit accounts cost the industry $1.910 billion in losses in 2014. Debit card fraud accounted for 66 percent of 2014 losses.
davefairtex wrote:
A check was cheapest for a merchant, if they could persuade the consumer to enroll in a check guarantee program. Checks cost about a dime. Yay checks! Grocery stores loved checks - from repeat customers who had gone through the credit check process.
Yes, checks were the cheapest, but not by a huge margin. The only costs a dime is wrong. Handling of paper checks and check fraud gives you around 1% loss if you used a good check verification service and actually followed the procedures and followed up with a good collection agency. (at least back in circa 2005). Consumers did not sign up for check guarantee, that was offered to merchants, however, generally only the smaller merchants purchased guarantee services because larger merchants like the grocery stores understood the percentages. Guarantee for a percent for the sale (more than the loss rate since guarantee companies assumed the risk and did the work) gave smaller merchants a guaranteed loss rate. It why if your big enough and have good actuarial data, you will self insure since you eliminate the middle man.
davefairtex wrote:
My strong sense, from my relatively short time in the business, is that there is plenty of "excess profit" in the transactions processing duopoly.
While the 2 large card associations (VISA, MC) do have some monopolistic power, they were always in competition against other cards Discover, AMEX, Citi, etc and other payment methods cash, check, debit and large players like Walmart, Applepay, Android. No one method can stray too far from the average cost or you get pretty substantial push back, particularly from larger merchants who just won't accept those higher payment costs. Your example of Walmart is a good example, but for Walmart a small savings over their volume can make a very large difference. But why do you think it took until recently for the to even look at it? It's because they have already optimized many of their other costs, for a small merchant, the transaction cost savings it pretty small compared to other optimizations they could make in their businesses. Also, you paint it as if the card associations are all that are involved. There are lots of players - issuers (those to issue the cards to consumers), acquirers (merchant side banks), third party processors that do much of the actual processing on both the acquirer and issuer side), and then the card associations (what you think of when you say VISA or Mastercard).
davefairtex wrote:
At one point I recall asking a merchant if he found cash to be a costly way of being paid. He just laughed at me. "Hit me up with some more of that 'costly cash'" he said.
There are other reasons to take cash, but with theft, counterfeit bills, time to mak deposits, security, etc your cost to take a payment is still fairly similar. Most people just don't think about the indirect costs. It's kind of like total cost of ownership on a car, almost no you ask will realize any moderate priced car is over $0.50/mile, and was worse before the central bank games when you actually need to consider opportunity costs. The point was that costs are all similar between payment methods - and generally run between 1-3%. You also missed what I think is the most important point, right now a merchant can sell to a customer who can not afford their goods - hence the record CC debt. That debt will all be eaten by the issuing banks (or taxpayers/shareholders/depositors) when it becomes obvious that debt is not going to be paid.
davefairtex wrote:
My strong sense, from my relatively short time in the business,
This is my take from a NOT short time in the business.
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This is my take from a NOT short time in the business.
Aha! Working for VISA perhaps? No wonder it sounded as though you are a big kool-aid drinker. :) For us, VISA was the gatekeeper on interchange fees, and we got the sense that they didn't care about fraud. Not really. How long did it take to roll out chip cards? Two decades? All that skimming & nobody cared. Fraud. Y-A-W-N. :) Also - the lawsuit that Walmart has filed against VISA for their monopolistic practices is a monopoly-case in point. Ditto the lawsuit (& settlement) in the mid-2000s. Retailers certainly would take my side, I suspect. Banks have a lot of weight in this country - so do the card associations. Individual retailers are much less powerful. That's just my sense. Another point: as a merchant, are you allowed to give a discount for cash? You are not. Is that a free market? No, it isn't. Monopoly at work! A bank I know in a certain foreign country decided not to offer VISA cards any longer. Why? VISA charges too much. Their new cards work on the Union Pay network. Not sure how well that works in the US. Probably, it doesn't. Could be the future, though. I do know about the one good thing cards bring for the retailer: people spend more money if they pay with a card. That's a pretty consistent survey result. Something about forking over cash makes people exercise restraint. That, and buying stuff with money they don't have - to your point. Perhaps the CC makes the float through to the next paycheck easier. I'm not sure that the additional net debt from cards moves the needle. Net CC increase per month: $2B. Total retail sales per month: about $480B. Maybe it moves the needle very, very gently. Bottom line though: I thoroughly distrust processing cost analysis that come out of the card/processing industry that talk about how expensive cash or checks are to process. Kind of like I don't trust Monsanto to review the health effects of their pesticides properly. There's a million ways to skew results if your paycheck depends on coming up with a certain answer. Ultimately, "cash" has no friends - not in banking, not in transaction processing, and not in government. Unless they want to confiscate it, of course. Reminds me of gold, a little.
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davefairtex wrote:
Aha! Working for VISA perhaps? No wonder it sounded as though you are a big kool-aid drinker. :)
You would be wrong. I have experience in multiple payment methods, but mostly check and ACH, so we were the competition.
davefairtex wrote:
For us, VISA was the gatekeeper on interchange fees, and we got the sense that they didn't care about fraud. Not really. How long did it take to roll out chip cards? Two decades? All that skimming & nobody cared. Fraud. Y-A-W-N. :)
You would be wrong here as well. The card associations very much tried to get issuers and merchants to change, but there was a very large infrastructure built up around magnetic stripe cards in the US. It's the whole you get their first, your then the last to upgrade to the next great thing (in this case chip cards). The push that finally made it happen was the rule change that went into effect on Oct. 1, 2015, when the responsibility for fraud was changed to the entity who had the least protective infrastructure. This finally created enough of an incentive to upgrade aging (but paid for) magnetic stripe based infrastructure.
davefairtex wrote:
Bottom line though: I thoroughly distrust processing cost analysis that come out of the card/processing industry that talk about how expensive cash or checks are to process.
Good thing I was primarily with the check/ACH side or you might really be dismissive....